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BUILDING BRANDS: A FURNITURE SPECIAL

How to stay in the game successfully
By Joe Carroll

Momentous events have changed the course of history. When asked to list the most significant in recent years, most of us would immediately think of the World Trade Centre on September 11, 2001; the recent tsunami in Japan; the ‘Great Recession' that began in late 2008 and doesn't seem quite over; or, the global influence of the Internet. These examples are ‘game changers'. Once they occurred, neither business nor life in general was ever the same.

I was recently asked to list the major changes I've seen during the 40-plus years I've been involved in the furniture industry. The more I thought, the more it occurred to me that I have, indeed, witnessed numerous game changers which have definitely influenced or significantly changed the course of our industry. There are lessons to be learned from these examples and they continue to inspire innovation throughout the furniture industry.

LEVITZ FURNITURE
The advent of the Levitz Furniture warehouse showroom in the 1960's marked the transition from the local, full-service independent furniture store or department store where most people went to buy furniture. The Levitz warehouse concept was new to the furniture industry but may have been influenced by a chain of clothing stores popular in the 1950s and 60s called Robert Hall.

Robert Hall was a pioneer of the low-overhead, large warehouse-type facility where one could buy well-made clothing, hung on pipe racks, at discount prices. As a child I remember their radio jingle:

"When the Value goes up, up, up
And the prices go down, down, down,
Robert Hall this season will show you the reason:
Low Overhead, Low Overhead."

The American public liked the idea of no-frills shopping. Levitz sold furniture at discount prices in large, warehouse-type structures with concrete floors stacked in metal racks several stories high. Although not as catchy as Robert Hall's, Levitz also had a popular radio and TV jingle called “You'll love it at Levitz”.

In Canada, Leon's Furniture continues to build its own version of the Levitz warehouse-showroom store. Meanwhile, discounted no-frills furniture is the norm for many retailers on both sides of the border. Stores like Costco, Wal-Mart, BJ's and Sam's Club are direct descendants of the concept Levitz launched almost 50 years ago.

QUICK SHIP
In 1980, I had only been selling advertising for Furniture/Today for a couple of years and was meeting with a North Carolina upholstery manufacturer called Fairfield Chair. All of a sudden the president says to me: "What would you say if I told you that I could ship my dealers custom upholstery in 10 days or less?"  I replied: "It would be a miracle. It currently takes dealers 12 to 14 weeks to get their shipments." (Case goods took even longer: 12 to 16 weeks).

He said: "Here's how I can do it. I give the dealer a choice of five different fabrics on any one of three different frames. I can manufacture and ship him any one of those combinations in 10 days or less."

I was so excited by this news that I forgot I was trying to sell him advertising and phoned our editor, the late Bill Peterson, to report what I felt was a major breakthrough in manufacturing.

Bill was like most editors. It was hard to tell him anything he hadn't already heard. He dampened my enthusiasm by saying: "Hell, Carroll, when a guy tells you he can ship in 10 days or less it just means he hasn't got any business. You'll see that when business gets better he won't be able to keep those delivery schedules."

Although Bill was right about most things, he called this one wrong. Fairfield Chair was not the only manufacturer to use Quick Ship as a way to do business in tough economic times. Retailers loved the concept and quickly learned they could greatly reduce their inventory and warehousing expenses by letting the manufacture bear the costs of shipping to them from their inventory.

Not too many years went by before this became the normal way to do business. Most manufacturers, except those at the very high end, would have to bear these costs or lose business to a competitor who had the capital to manufacture, inventory and ship before being paid by his customer. So from the mid-1980s, Quick Ship was here to stay.

FAST DELIVERY – ASHLEY FURNITURE
Soon afterward, I think it was around 1988, I was visiting Ashley Furniture in Arcadia, Wisconsin. Sitting in the president's office looking out the window at hundreds of Ashley trucks in the parking lot, I jokingly asked Ron Wanek if he was going in to the trucking business. He then told me that he had long realised that the manufacturer who could lower a dealer's inventory costs by getting his order quickly to him would win out over a competitor with slower delivery.

He told me his goal was to be able to deliver 85 percent of his line in 10 days or less. He planned to eventually have 1,000 tractors, 2,000 trailers and seven distribution centres around America to accomplish this.

Later that year, I tested his theory by asking an Ashley dealer in Arizona if he actually received his deliveries in 10 days or less.

"Better than that," he replied, "I usually get my shipments in a week or less. Am I happy with Ashley Furniture? You bet I am. Last year I saved over US$90,000 from not having to warehouse Ashley's furniture. Sure, I've had a few quality problems but am I going to give them more business this year? You bet I am!"

Ashley heavily marketed the fact that whereas the national average number of retail turns per year was 2.5, Ashley customers could expect 14 turns or more because they would have furniture to replace that which was sold in a week or so. He ran ads everywhere he could think of explaining GMROI (Gross Margin Return On Investment) for a couple of years until every dealer in the US was aware of the profit potential in carrying the Ashley line.

ETHAN ALLEN
Ethan Allen was the inspiration of Ted Baumritter and Nat Ancell, who were brothers in law. They founded the Baumritter Corporation in the early 1930's in New York as a wholesaler specialising in housewares and garden items.

In 1936, they introduced a 28-piece line of Early American-style furniture which they named Ethan Allen, after the revolutionary war hero. As America prospered during the 1940s and 1950s, Ethan Allen advertised its furniture as "one complete source for all your furniture needs in modern or traditional styling."

Then, in 1962 they published a catalogue called Treasury featuring their entire line of furniture inspired by antiques from 1700 to 1850, claiming: "When you acquire Ethan Allen furniture, you invest in a way of life."
It was not until the 1990's that Ethan Allen would categorise its furnishings by lifestyle: American Country, Casual Contemporary, Casual Elegance and Formal.

What I witnessed as a young man walking into an Ethan Allen store to shop for furniture in the 1960's was that it was unlike any other, regular, furniture store. We were greeted professionally at the door by a sales person who turned out to be an interior decorator. She handed us a catalogue and invited to look around the store, telling us to take our time but to call her when we had questions.

She suggested we mark the items we liked in the catalogue for future reference. As we were a young married couple with a small income, we were relieved to not be asked how much money we had to spend. Nor were we pressured to buy in any way. We were made to feel important. We asked her advice on colours and fabrics and ended up buying a sofa, upholstered chair and coffee table for about US$2,000.

That represented several years of saving and as my salary was around US$15,000 a year at the time, was quite an investment but we felt we had purchased furniture that would last and that we could be proud of.

ROOMS TO GO
RTG was founded in 1990 by Morty Seaman and his son Jeff. Both had grown up in the industry having worked in Jeff's grandfather's furniture store in Woodbury, New York. Jeff worked in the store while he was in school and during the summer. He graduated with an MBA from Wharton and became vice president when he was 23.

Morty was president of Seaman's Home Furnishings. In 1988 the store was taken over in a leveraged buyout for $350 million. Morty and Jeff stayed on to manage the business and to help restructure it. In 1989 the brokerage firm that had handled the buyout replaced the Seamans with a former department store executive.

It was at this point that Jeffrey decided to start his own business. He travelled the US researching various types of successful retail stores. He visited not only furniture stores, but clothing retailers, toy stores and department stores.

In the late 1990's I heard Jeff speak at an industry conference. When asked how he got the idea for Rooms To Go he said, "From The Gap, McDonald's and Domino's Pizza." He went on to explain that when you think of The Gap you think of a store that uses lots of windows to create an open, interesting and colourful setting. It draws the customer to come inside.

With McDonald's, you have a store whose architecture - including the famous golden arches - is recognised the moment you see it. The product is consistent, the menu limited and you can make your purchase in minutes and drive away with it if you like.

From Domino's, whose promise is they will deliver your pizza to you in 30 minutes or it is free, Jeff learned among vital retail lesion. He recalls attending a football game when the person sitting beside him called Domino's on his cell phone and ordered a pizza. Jeff thought there was no way can they deliver a pizza to someone in the stands during a football game. However, Dominos delivered on its promise and caused Jeff to realise that even when the product is mediocre ("A kid from New York who knows good pizza would never think of ordering from Domino's," he is quoted as saying) people will put up with it just to get it quickly and without a hassle.

We often refer to the 1990s as the Age of Instant Gratification so Jeff was right on target in identifying the needs of his customer.

Inspired by these examples, Jeff built stores with a lot of windows, well lighted so that people driving by could see the variety of furniture and colours. The stores would be located on main thoroughfares or on the corner of a shopping centre so that that would be easily accessible to customers who wanted to pay a quick visit. Like McDonald's, he offered a limited menu of room settings where the furniture could be purchased completely colour and style coordinated.

At first he offered groupings of a sofa, loveseat, chair, coffee table, two end tables, a lamp, mirror or painting. Popular price points were US$1,499 and US$1,999. It provided the average family who had no decorating skills with the confidence that their living room would look good. One of RTG's first advertising slogans was "Buy a piece, save a little. Buy the room, save a lot!"

The rest, as they say, is history. Rooms To Go soon rose to be the top ranked independent retailer in the United States.

Where Ethan Allen catered to the upper middle class shopper who wanted fine, tasteful furniture; Rooms To Go catered to the young married and working class who wanted nice, modestly priced furnishings. Both found their marketing niche, both offered original concepts. Both companies changed the way we sell furniture at retail today.

About The Author
Joseph F Carroll, former Publisher of Furniture/Today, is now President of McNeill Communications, a High Point based agency specializing in marketing, advertising and public relations.